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9 Tips and Tricks for Approaching the Bank for a Mortgage (in Today’s Lending Environment)

9 Tips and Tricks for Approaching the Bank for a Mortgage (in Today’s Lending Environment) National Propertyscouts

In a recent NZ Herald podcast Frances Cook talked to Bruce Patton from Loan Market about the CCCFA and learnt some good tips and tricks when it comes to fronting up to banks for a mortgage in today’s lending environment.

Here's a link to the 33-minute podcast, but, if you don’t have time to listen here are some little gems we picked out of it:

  1. Changes to the CCCFA will include lending institutions you approach for lending looking at your costs and expenses in the future, not retrospectively.
  2. Banks are cautious at the best of times, evidenced by the very low number of mortgagee sales we see here in NZ.
  3. Prepare relevant information in the form of a budget for the lender.
  4. Think 3 months back and 3 months in advance when preparing a budget.
  5. Make sure that you show in your budget you can afford the mortgage you are applying for.
  6. Remember to include all debt like credit cards and the likes of After Pay.
  7. Try to get rid of all short-term debt before applying for your mortgage.
  8. Credit scoring is becoming a lot more prevalent in NZ. Credit scores go from 1 to 1000 with 1000 being at the top (good credit) of the scale.
  9. There are about 3 main credit agencies in NZ. You can apply to them for your credit score, and they are obliged to provide it to you free of charge as it's personal information they hold about you. It pays to know your credit score.

An interesting section of the podcast dealt with the common terms for mortgage structures:

Fixed: Means the loan is locked in for a specific term. In the current debt market, Borrowers pay a slight premium for the certainty of a fixed-term loan. If you try to break the fixed term loan before it ends you can be charged a ‘break fee’ if rates have gone down since you took the loan out.

Floating: The interest rate is changeable during the term of the loan.

Revolving: Think of it as a big overdraft. Works on a floating rate. You can put money in or take it out of a revolving loan.

Offset: Like a revolving account but you are able to compartment accounts within the main account. It’s a good way to pay off a mortgage quickly and like revolving and floating is always at the floating rate.

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